Our daily roundup of retirement news your clients may be thinking about.
Some workers may consider suing their employers if the 401(k) plans they offer have limited investment options, poor funds and hefty fees, according to this article on Forbes. Hundreds of thousands of people who were dissatisfied with their workplace 401(k) plans filed such a lawsuit and many of them have won settlements in recent years. Most of these cases alleged that the employer "breached its fiduciary duties" for offering them a low quality plan. –Forbes
Retirees who rely only on the returns of their investments are more confident that they won't outlive their nest egg but may need to scale down their lifestyle if their income goes south, according to this article on Morningstar. Those who adopt the reinvest-and-rebalance approach are more attuned to market movement and valuation but run the risk of reducing their portfolio's total return by prematurely scaling back on an asset class. Retirees who decide to depend on income distributions while rebalancing portfolio to meet living costs will have a baseline of income for living expenses but can expect their portfolio's total return potential to be lower compared with those who use the reinvest-and-rebalance approach. –Morningstar
The type of retirement plan will dictate the applicable rules in splitting the assets between a couple who is on the brink of divorce, according to this article on CBS Moneywatch. For instance, the couples will need to use a Qualified Domestic Relations Order to divide their 401(k) funds without the burden of taxes and penalties that come with early distributions. Couples also need to research on the federal, state and local laws that apply on the treatment of property in relation to a divorce. –CBS Moneywatch
Paying down a home mortgage before retirement means less worry for retirees, and it will make the option of a reverse mortgage available to them, says Harold Evensky, chairman of Evensky & Katz/Foldes Financial Wealth Management. However, clients need to understand that they may no longer possess the assets they sell to write off the debt, Evensky says. Also, "[t]he after-tax return on a conservative long-term investment (the mortgage period) is often higher than the net after-tax mortgage cost." –USA Today
The Obama administration issued guidelines that will enable states to encourage their workers who have no access to workplace retirement plans to build their nest egg, according to this article in The New York Times. “It is clear that workers are not saving enough for a secure retirement,” Labor Secretary Thomas E. Perez said in a statement. “This guidance is another plank in the economic security platform that President Obama and this administration have been building as we help create new savings options.” –The New York Times
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